Now that the dust has settled and the Gems & Jewellery industry has had time to ponder over the impact of the recent Budget announcements, opinion is divided about the benefits that will accrue to the sector due to the reduction in the import duty of cut and polished diamonds and gemstones to 5% from the existing 7.5%.

The overall feeling in the industry is that the small duty cut will offer only limited relief to the trade, as cut and polished diamonds constitute merely 5% of the total imports of diamonds into the country. Finance Minister Nirmala Sitharaman did not announce any change in the 10% duty on unpolished diamonds that comprise the bulk of imports.

Not much benefit to the industry
Even though the sector is disappointed that the import duty was cut only to 5% and not to 2.5%, as it had expected, some industry players are optimistic all the same, saying that the duty cut will bring much-needed relief to the industry, which has suffered greatly because of the pandemic. 
 

Says Dinesh Lakhani, Kiran Gems, Mumbai, “India’s Cutting & Polishing industry has taken a strong global leadership position in manufacturing, and that has made India the main polished diamond procurement source for all the jewellery retailers and manufacturers globally. Import of Cut & Polished diamonds into India is approximately 5% of the exports of Cut & Polished Diamonds done from India (per the latest GJEPC data). 

“This import would constitute goods manufactured in other countries and being supplied to India, as well as the reimport of leftover goods after fulfilment of supply orders through exports from India. Hence, it is a part of the overall supply flow, wherein India is the main supplier catering to the entire C&P diamond demand globally. Any measure which aids this trade flow is positive, reducing the duty on these C&P imports helps in some cost savings for Indian exporters and manufacturers (servicing supply orders from overseas buyers), as well as Indian jewellery retailers.”

However, the fact remains that India manufactures the bulk of the world’s polished diamonds, and the volume of import of cut and polished diamonds is very low. Sharing his opinion, Shrey Mehta, Pooja Diamonds, Mumbai, says, “The reduction in the import duty of cut and polished diamonds and gemstones will reduce the cost of the imported finished goods. However, India manufactures 90% of the polished diamonds, and the import is very less, compared to our manufacturing. So, this won't make a big difference to the industry. I would say it will have a very minor impact. And for the retailers too, there will only be a marginal benefit.” 
 

Agrees Dheeraj Menda, Studio Reves, Mumbai, “A small duty cut of 2.5% cannot make much of a difference to the industry. It might benefit loose diamonds somewhat, but other than that, this is not going to help anyone appreciably. It certainly won’t help me. A 2%-2.5% benefit is something we can get just by bargaining with the customers!”

However, some sections of the industry are of the opinion that even this small duty cut will help to expand the market. Says Rohan Sharma, RK Jewellers, Delhi, “This decision will act as a much-needed relief to the industry, as well as our consumers. Though we were expecting more from this budget, but the overall announcement was positive and we are expecting market expansion because of it. While we are happy with the Government’s decision, but the fact is that this will be more beneficial to exporters, as the contribution of polished diamonds to the trade is less in the domestic market.”

Milind Mathur, Kohinoor Jewellers, Agra, believes that the import duty cut to 5% will prove to be beneficial for all three sub-segments of the industry – manufacturers, exporters and retailers. Explaining his point, he says, “The import duty cut will help traders, and along with them, it will also be beneficial to exporters. Polished diamonds play only a small part in the domestic market of the trading business, but it will certainly help exporters to compete in the global market. This would allow for the procurement of gems and diamonds at a low cost, as a result of which, it would impact the cost incurred by the customer too. This move will help to stabilize the current hike in the price and will also overcome the shortage of gems and polished diamonds we are facing because of the increase in demand.”

In the end, though industry players are expressing somewhat differing opinions, there is consensus about one thing – there will not be any appreciable and measurable benefit to the domestic diamond industry as a result of this move.